If you've already started thinking about your 2025 tax return, you may have reason for optimism. Treasury Secretary Scott Bessent is forecasting what he calls a "gigantic" refund season in early 2026, thanks to retroactive tax cuts enacted in President Trump's One Big Beautiful Bill Act (OBBBA). Here's what you need to know about the windfall heading to millions of American households.

The Refund Bonanza Explained

The OBBBA, signed into law in July 2025, included several tax provisions that apply retroactively to the 2025 tax year. However, because the IRS did not immediately adjust withholding tables after the law passed, most workers continued to have more taxes withheld from their paychecks than the new law required.

The result? Instead of receiving the benefit of tax cuts through higher take-home pay throughout the year, most taxpayers will receive those savings as a lump sum when they file their 2025 returns.

"I can see that we're gonna have a gigantic refund year in the first quarter. Households could see $1,000-$2,000 refunds."

— Scott Bessent, Treasury Secretary

How Much Bigger Will Refunds Be?

According to the Tax Foundation, the OBBBA could raise the average 2026 tax refund to approximately $3,800—up from $3,052 in 2025. That represents a potential increase of $300 to $1,000 for typical filers, though higher-income households may see even larger benefits.

Private-sector economic analysis suggests the law will result in up to $100 billion in additional refunds overall, providing a significant injection of cash into the economy during the first quarter of 2026.

Key Tax Changes in the OBBBA

The One Big Beautiful Bill Act included numerous tax provisions that will affect 2025 returns:

  • Bigger standard deduction: Increased amounts for single filers and married couples filing jointly
  • Enhanced child tax credit: Higher maximum credits available for qualifying children
  • SALT cap increase: The deduction for state and local taxes rose from $10,000 to $40,000
  • $6,000 senior tax break: New deduction available to taxpayers above a certain age
  • No tax on tips: Tipped income excluded from federal taxation for qualifying workers
  • Overtime exemption: Overtime pay receives favorable tax treatment under certain conditions
  • Auto loan interest deduction: New deduction for interest paid on vehicle loans

Who Benefits Most?

While nearly all taxpayers will see some benefit, the distribution of tax savings isn't equal. According to the Tax Policy Center, approximately 60 cents of every dollar in new tax breaks from the OBBBA will flow to the top 20% of households—those with incomes above $217,000 per year.

The SALT cap increase is a primary driver of this skew, as it primarily benefits higher-income households in high-tax states like New York, California, and New Jersey. For middle-income families in lower-tax states, the benefits will be more modest.

Economic Implications

The flood of refunds arriving in early 2026 could provide a meaningful boost to consumer spending—though the magnitude is debated. The Oxford Economics report estimates that the tax changes could boost refunds and lower tax bills by as much as $50 billion, but suggests households will likely spend less than half that amount.

For retailers and consumer-facing businesses, the timing could be fortuitous. Refunds landing just as holiday credit card bills come due may provide short-term relief for stretched household budgets, potentially supporting continued consumer spending into spring.

What You Should Do Now

To maximize your refund when tax season arrives, consider these steps:

  • Review your withholding: The IRS has updated withholding tables for 2026, so your future paychecks should reflect the new rates
  • Gather documentation: If you have tipped income, overtime pay, or significant SALT deductions, ensure you have proper records
  • Consult a tax professional: The new provisions are complex, and a qualified preparer can help ensure you claim all available benefits
  • Plan for the windfall: Consider directing extra refund dollars toward debt paydown, emergency savings, or retirement contributions

The Bottom Line

For most American households, the 2026 tax refund season promises to deliver a welcome bonus. While the benefits are skewed toward higher earners, even middle-income families can expect refunds that exceed recent years. The key is understanding which provisions apply to your situation and ensuring you have the documentation needed to claim every dollar you're entitled to receive.